CGU Insurance Limited v Blakeley & Ors

[2015] HCATrans 232

[2015] HCATrans 232

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M118 of 2015

B e t w e e n -

CGU INSURANCE LIMITED (ACN 004 478 371)

Applicant

and

ROSS BLAKELEY AS JOINT AND SEVERAL LIQUIDATORS OF AKRON ROADS PTY LTD (IN LIQ) (ACN 004 769 895) AND MICHAEL RYAN AS JOINT AND SEVERAL LIQUIDATORS OF AKRON ROADS PTY LTD (IN LIQ) (ACN 004 769 895) AND QUENTIN OLDE AS JOINT AND SEVERAL LIQUIDATORS OF AKRON ROADS PTY LTD (IN LIQ) (ACN 004 769 895)

First Respondent

AKRON ROADS PTY LTD (IN LIQ) (ACN 004 769 895)

Second Respondent

TREVOR PAUL CREWE

Third Respondent

ROBERT MARK SILL

Fourth Respondent

JOHN MARTIN SILL

Fifth Respondent

CREWE SHARP PTY LTD (IN LIQ) (ACN 066 670 013)

Sixth Respondent

Application for special leave to appeal

KIEFEL J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 11 SEPTEMBER 2015, AT 11.24 AM

Copyright in the High Court of Australia

____________________

MR D.J. O’CALLAGHAN, QC:   If the Court pleases, I appear with MS R.L. ENBOM for the applicant.  (instructed by (Norton Rose Fulbright Australia)

MR P.D. CRUTCHFIELD, QC:   If the Court pleases I appear with MR O. BIGOS for the first and second respondents.  (instructed by King & Wood Mallesons)

KIEFEL J:   Yes, Mr O’Callaghan.

MR O’CALLAGHAN:   If the Court pleases, the important question raised by this application is whether by operation of section 562 of the Corporations Act or 117 of the Bankruptcy Act a justiciable controversy exists with respect to private contractual rights at the suit of someone who is not a party to the contract and who does not claim that their rights were infringed. 

On the current state of the authorities in the intermediate courts of appeal where a plaintiff seeks to join an insurer seeking a declaration of the type sought here, the answer to the question does a justiciable controversy exist would be, or is, no in Queensland, yes in Victoria, South Australia and the Federal Court and in Western Australia one would have to place an each‑way bet because of the divergence of views between Justice McLure and Justice Newnes.  In our submission, the principal ground for granting leave should be the resolution of the issues that exist between those different decisions.

KIEFEL J:   What do you say to the point that it is an interlocutory matter?

MR O’CALLAGHAN:   We say, with great respect, that it is no such thing, your Honour.  The issue of whether the court has jurisdiction in the sense of authority to decide this question has been finally determined and although some parts of the judgment below suggest that it was a question that could be left for trial we say that the court has determined that issue and it is not open to us at the end of the trial to go back and make the submissions again.

GORDON J:   When is the trial?

MR O’CALLAGHAN:   We do not know yet, your Honour.  We expect sometime in March of next year.  I think that is the latest intelligence from the court.  No specific date has been fixed yet.  Mr Crutchfield corrected me.  He says it is 8 February.  I did not know that.

KIEFEL J:   You were saying that it is essential that the matter be determined before the matters proceed to trial?

MR O’CALLAGHAN:   We say, yes, your Honour.  The question of whether the court has jurisdiction, as I say in the sense of authority to decide - to make this declaration is an anterior question that must and should be resolved before the trial and that it would be, we would submit, to put it too highly, a scandalous waste of resources and inefficient case management to insist that a party such as CGU sit through a two‑week trial only to be told at the end of it that the court did not have jurisdiction after all.  The question of whether there is jurisdiction does not depend upon any additional facts or facts that may change at trial.  The question is as clear today as it ever will be. 

KIEFEL J:   You refer to the declaration.  The order was for joinder, was it not?

MR O’CALLAGHAN:   It was an order for joinder, your Honour, but whether a party seeks to join CGU to a proceeding or to issue a separate proceeding really should not make any difference as to the determination of the fundamental question of whether the court has authority to make the declaration.  It is that question, does the court have authority to make the declaration that the intermediate courts of appeal have expressed differences about and that issue is not real, we would submit, on a joinder application as it is ‑ ‑ ‑

KIEFEL J:   We might hear from Mr Crutchfield at this point.

MR O’CALLAGHAN:   If your Honour pleases. 

KIEFEL J:   Obviously, Mr Crutchfield, what we are interested in is why this matter should not be the subject of leave given the state of authority in the intermediate appellate courts.

MR CRUTCHFIELD:   For two principal reasons or perhaps one main reason and that is the point your Honour Justice Kiefel raised - this is interlocutory and our friends do not grapple with the difficulty they face that the order that was made was a joinder order.  The order that was made - and if your Honours have the rule, it is at page 3 of the application book, paragraph 8, rule 9.06(b)(ii):

there may exist a question arising out of, or relating to, or connected with, any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding –

Now, that limb of the rule did not exist Interchase. 

KIEFEL J:   But what facts would there be necessary – the question is this.  There is a discrete legal point that can be the subject of special leave - what facts would need to be litigated which would go to the question of whether the joinder is ‑ ‑ ‑

MR CRUTCHFIELD:   Sure, the question that CGU want agitated is whether or not there is, as they would have it, power in the court to grant a declaration against what they describe as a stranger to the insurance policy.  The answer to that question will depend upon, or may depend upon, all the facts and circumstances that exist at the trial. 

So, take an example where Mr Crewe, who is an insured, turns up at the trial and says, “You are right, CGU, we do not take issue with this policy” and the declaration were granted in those circumstances, then the court would have all the facts and circumstances as to whether or not a declaration should go in those circumstances because even Justice McLure - so in Interchase we would have the additional rule. 

In WA they rely on the dissenting judgment of Justice McLure but as her Honour pointed out even – and if I could take your Honours to what Justice McLure said which is at page 16 of the application book paragraph 34, her Honour made it clear it is a matter of discretion not power.  Her Honour said:

Accepting that a third party can in appropriate circumstances obtain declaratory relief in respect of the private rights and duties of others, such occasions are likely to be very rare. 

If your Honours could go please to paragraphs 46 and following of Justice Judd’s decision which is at page 19, Justice Judd said:

If CGU is joined as a defendant, the liquidators must decide whether they will actively participate in the controversy between CGU and the plaintiffs.  They, too, may be bound by the outcome, unable to re‑litigate any issue concerning CGU’s liability in another proceeding.

It is unlikely that the joinder of CGU as a defendant will be prejudicial to the efficient and cost‑effective management of the trial –

Then 48:

The claim by the plaintiffs, that CGU is bound to indemnify the insured, arises out of, or relates to, or is connected with their claim against the insured as defendants.  The plaintiffs have a sufficient interest in the proceeds of insurance to provide them with standing to apply for declaratory relief. 

His Honour there is dealing with whether or not it is the main part of the rule in 9.06(b)(ii) whether or not they should be joined as a party.  If your Honours could go back please to paragraph 19 of Justice Judd’s decision, he makes similar points at page 8. line 20:

CGU approached the application for joinder –

that is joinder as a party –

as an opportunity to advance substantive defences, including discretionary considerations, as if at trial, or the trial of a separate question.  One consequence of that approach was to create uncertainty about the test to be applied . . . Ordinarily, an application for joinder under r 9.06 would require the Court to consider a range of discretionary considerations informing the justice and convenience of determining the related issue in the main proceeding.  The approach taken by CGU would have the Court assess the merits of the various defences, but for what purpose?  Is the Court to decide whether the proposed case against CGU is hopeless –

et cetera.  Then, in 20 his Honour says:

The approach taken by CGU had the tendency to divert attention from discretionary considerations, which inform the application of r 9.06, in favour of an analysis of the merits. 

KIEFEL J:   Well, his Honour had no difficulty determining the application for joinder and the Court of Appeal granted leave to appeal and heard the appeal and it had no difficulty determining it as a discrete legal point.

MR CRUTCHFIELD:   On the question of joinder only on the facts and circumstances but the Court of Appeal, your Honour Justice Kiefel, made a similar point to Justice Judd at paragraphs 37 and following - particularly 37, which is at page 44 of the application book.  This is why, your Honours ‑ ‑ ‑

KIEFEL J:   That is as to the question of grant of relief.

MR CRUTCHFIELD:   Well, this is why - to come back to your Honour’s original question that you were asking why should not leave be granted now so this can be determined now ‑ ‑ ‑

KIEFEL J:   Is it a discrete legal point, that is the question.

MR CRUTCHFIELD:   That is the point, that is the question and the answer is the cake is not cooked because you do not know what all the facts and circumstances are that have informed that legal question.  That is what they are saying in 37. 

KIEFEL J:   But their Honours are talking about remedies and the appropriate relief and their Honours determined the question of joinder.

MR CRUTCHFIELD:   Joinder only, that is right, but our friends would have it ‑ ‑ ‑

KIEFEL J:   But that is the only question – that is the subject of the application for special leave. 

MR CRUTCHFIELD:   Sure, but our friends would have it that the court – what is going to happen we are going to get in Canberra and our friends are going to say the difficulty, with respect, the court is going to have is in resolving that question we will be submitting because they say the joinder question overlaps completely with the power to grant a declaration.  That is their point. 

Our answer to that is there is no dispute in the authorities in relation to that question.  There is jurisdictional power to grant a declaration and what President McLure was saying in the Court of Appeal was it is a very rare case where a stranger so‑called can get such a declaration.  But even her Honour is saying that is discretionary and in Interchase in Queensland, which is the other decision they rely upon, they did not have a rule like - they did not then have a rule like is possessed in Victoria.  Queensland does now have such a rule.  These are all discretionary matters ‑ ‑ ‑

GORDON J:   But you accept, do you not, Mr Crutchfield, that the existence of a claim that is the actual, in effect, anterior question is a question which has to exist before you get to (b)(ii) which is what the court was saying – what Justice Judd was saying?

MR CRUTCHFIELD:   The anterior question – there is not a dispute, we submit, at an intermediate appellate level that there is power to grant a declaration.  Our friends say I am wrong about that and that is the special leave point they wish to agitate ‑ ‑ ‑

GORDON J:   That is my point.  That is the issue between you which is the subject of the application and which is, in a sense, the anterior question upon which rule 9.06(b)(ii) launches.

MR CRUTCHFIELD:   Your Honour is precisely right and if your Honours see it in that, if I might describe it as black and white way and it does not matter what the facts and circumstances are at trial, one does not need to have those facts and circumstances in order to resolve this question, then there is not much more I can say.  But we submit respectfully that that would be – that is not really the issue because none of the cases that our friends rely upon say there is no power to grant a declaration.  One has to see all the facts and circumstances.  That is what the Court of Appeal is saying in 37 at page 44:

Whether the court that ultimately hears the trial of this proceeding grants any relief against CGU is a matter that cannot be known at this stage.  In the circumstances of the present proceeding, the possibility that relief may ultimately be granted exists either because Mr Crewe or Crewe Sharp may change their position –

So we do not know whether that – because one of the points - our friends rely on the Interchase decision and say the insureds here are not contesting CGU’s decision to deny liability.  Well, we say, firstly, that is factually inaccurate in the case of Mr Crewe but we will not know until the trial whether or not ‑ what the position is.  The liquidator might turn up at the trial and say – the liquidator of the other insured corporation might turn up at the trial and say we do contest indemnity. 

GORDON J:  What was the basis for denial of indemnity?

MR CRUTCHFIELD:   There may have been a couple but relevantly the main one was they said policy does not respond because it is a professional indemnity policy.  It is not a director’s insurance policy.  It is a question of the proper construction of the policy.  The end of 37, the last sentence:

For present purposes, all that matters is that the first and second respondents –

that is our clients:

have a sound basis for seeking declaratory relief, on the basis that there may be practical utility in having an issue in which they have a real interest resolved in this manner.

We have the trial.  If CGU say there was no practical utility then they can come back to this Court.  If the Court pleases.

KIEFEL J:   Mr O’Callaghan, your notice of appeal is somewhat lengthy.

MR O’CALLAGHAN:   It is, your Honour, yes. We could easily make it less so.

KIEFEL J:   We will come back to that in a moment.  Grounds 2, 3 and 4 really do you need to say anything more than that?

MR O’CALLAGHAN:   I will just turn them up, your Honour, I am sorry.

KIEFEL J:   Or even 2 and 3 really.

MR O’CALLAGHAN:   Yes.  That may well be sufficient.  There may also be a question of the court’s failure properly to consider an issue but perhaps we can give that some thought and consider what you ‑ ‑ ‑

KIEFEL J:   I do not want you to be expanding beyond what – and let us be clear, this is – there will be a grant of special leave in this matter but it is on the basis that the facts are as they are and that there is a refusal by the insurer under the policy and that the question is purely a matter of law to be determined.

MR O’CALLAGHAN:   That is the foundation of our application, your Honour.

KIEFEL J:   Yes.  Beyond that we shall leave it to you to confine the notice of appeal appropriately to the discrete legal questions.

MR O’CALLAGHAN:   Yes, your Honour.

KIEFEL J:   Otherwise there will be a grant of special leave. 

MR CRUTCHFIELD:   Would your Honour’s hear me on the question of costs?  I am not sure whether our friends are pressing that but we submit that any grant of special leave - we put this in our submissions, paragraph 17 ‑ ‑ ‑

KIEFEL J:   It is not usual to make an order for costs on a grant, in any event.

MR CRUTCHFIELD:   Yes, if your Honour pleases.  Can I just raise one other matter?  We would wish to ensure that if this issue is decided against CGU in the High Court, they cannot have their cake and eat it.  Once we have the trial they should, we submit, undertake – they should undertake now that they are not going to reagitate this issue if the facts are different at the trial.  If the Court pleases, we would ask for that undertaking.  They get one go at it.

KIEFEL J:   We do not think it is appropriate to condition the grant of special leave in that manner, Mr Crutchfield. 

MR CRUTCHFIELD:   If the Court pleases.

KIEFEL J:   I am sure that once the matter is determined in this Court that will be the end of it.

AT 11.42 AM THE MATTER WAS CONCLUDED